Interest Rate Cuts Alone Not Enough To Rescue Homeowner Loan Market
The Bank of England’s Monetary Policy Committee announced yesterday that the base rate of interest for homeowner loans and mortgages was to be reduced once again, to 1.5 per cent, the lowest ever since the Bank of England opened its doors in 1694.
Although the move was widely expected, many industry experts have been quick to point out that rate cuts alone are not sufficient to provide the much needed boost for the housing and homeowner loan markets and that the Government needs to do much more than it currently is.
The general consensus of opinion is that, whilst the rate cut is welcome and will certainly help borrowers continue to meet their loan repayments, more needs to be done to increase the availability of new loans, by helping banks and building societies restore liquidity and introduce measures to encourage individuals, first time buyers particularly, to commit to moving house.
Peter Bolton of the National Association of Estate Agents said “The fact that without the major lenders passing on this cut and without stronger commitment from the Government to fully address the problems of the housing market, this cut is practically an exercise in spin. What is particularly frustrating is that it is evident that there is a pent up level of demand among first time buyers that if released could provide the stimulus needed to kick start the housing market.”
Vince Cable of the Liberal Democrats said “Cutting interest rates can only go so far to help business and individual borrowers. For many borrowers, the problem is not the price of credit but its availability. The Government must now set a clear strategy for kick starting lending to consumers and sound businesses. Unless the lending market can be quickly unfrozen, ministers will have to investigate whether one of the state owned banks can be used to increase lending to businesses.”
